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Anirudh Gupta
CA Aspirant|Content ... • 7h
Daily dose of financial ratios by Anirudh Gupta Current ratio: =Current assets/current liabilities Purpose: -To evaluate the company's short-term financial health and liquidity. -This ratio tells us whether the company can meet its short term obligations with its short-term assets like cash, receivables, and inventory. What’s short term? -Typically, short term refers to a period of 12 months. -However, if the company’s operating cycle exceeds 12 months, then the duration of the operating cycle is considered instead. So,its never strictly 12 months, it depends upon each case. Ideal Ratio: >2, -Indicates that surplus assets are not being effectively used to generate enough cash. (Company ban gayi laad saab,sab kuch hain lekin kaam nahi kar raha hein) 1.5-2, -Capable of meeting its short term obligations. (Company mera baap jaisa hai , na udhaar ka bojh, na paise ki barbaadi. Har rupiya kaam mein lagta hai!) <1, -Fails to meet its short term obligations,company at risk (ab company banega aur ek nirav modi ,aur ek vijay mallya) On a final note, “Stop scrolling that creates nuisance, learn finance to give your life a new sense.” Follow for more.
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